Major tax breaks announced - what you need to know

Source: GCIS. Finance Minister Enoch Godongwana.

Furthermore, new tax-relief measures have also been announced - designed to ease household pressure and support economic growth amid ongoing financial challenges. With this in mind:

• Personal income tax brackets and rebates were adjusted in full to reflect inflation, helping taxpayers keep more of their incomes in real terms.
• The annual tax‑free investment limit (for tax‑free savings accounts) was increased from R36,000 to R46,000 per year.
• The limit on retirement-fund deductions was raised from R350,000 to R430,000 per year, allowing individuals to contribute more each year on a tax‑free basis, and
• The compulsory Vat registration threshold was raised from R1m to R2.3m, reducing compliance burdens on smaller businesses.

In addition, the capital gains tax exemption for the sale of a small business by older persons increased from R1.8m to R2.7m (applicable to businesses worth up to R15 m).

"These measures acknowledge the sustained and rising cost challenges facing South Africans, particularly increasing municipal rates and tariffs for essential services such as water and electricity," says Andrew Golding, chief executive of the Pam Golding Property group.

"For the residential property market, any improvement in household cash flow is significant. Increased disposable income enhances affordability, supports buyer confidence and strengthens the ability of first-time purchasers to enter the market. In an environment where interest-rate stability and competitive lending conditions are already underpinning activity, these measures provide an additional tailwind."

Health & Social Welfare

#BudgetSpeech2026: SRD grant unchanged, other Sassa social grants see hike

6 hours

"Finance Minister Enoch Godongwana has displayed a credible pair of hands in playing well the better economic cards he now holds in addressing the inevitable competing demands on South Africa’s still limited public finances," says NWU Business School economist, Raymond Parsons.

"While global factors still pose a risk, South Africa’s terms of trade have improved as a result of the commodity price boom. The Budget strategy now offers a more stable macro-background, with the prospect of further interest rate cuts this year, and possible sovereign credit rating upgrades over the next couple of years. Business and consumer confidence should also gain from the Budget relief on ‘bracket creep’ and medical-aid credits."

"The major advantage of building confidence in fiscal sustainability through the Budget’s commitment to higher inclusive growth is not only that it strengthens resilience but also makes other aims - such as job creation and a bigger tax base - easier to attain."

Fiscal outlook positive

Adding to the collective discourse was Elna Moolman, Standard Bank Group Head: South Africa Macroeconomic Research, who said Godongwana's announcements was in line with Standard Bank's long-standing expectation.

"Treasury remained committed to its fiscal consolidation goals of reaching a peak in the debt-GDP ratio in this (FY25/26) fiscal year.

"This is achieved with very conservative revenue assumptions to which we see notable upside risk – in other words, the fiscal outcomes could easily be better than forecast in this Budget," Moolman said.

"Achieving the planned fiscal consolidation is positive for the bond market and SA’s sovereign credit ratings," she added. But, this Budget doesn’t justify further bond gains, she cautioned: "SA government bonds have arguably already been discounting this fiscal improvement in recent months, after previously being unduly sceptical."

Furthermore, this Budget also doesn’t alter our expectations for SA’s sovereign credit ratings, she noted. "We see a high probability of another upgrade by S&P this year, but imminent positive rating action by Moody’s and Fitch cannot be taken for granted."

Growth requires confidence

"Post-Budget, a litmus test will therefore be whether a sufficient number of companies now feel that the policy environment and growth prospects justify their making fresh plans for expansion," interjected Parsons. "The VAT assistance to SMMEs is welcome. President Cyril Ramaphosa’s next Investment Conference in March must be another platform to help do so.

"Once again, the challenge remains to ensure that growth-friendly policy and project commitments are translated into reality in ways that underpin long-term investor confidence, as well as making a tangible difference in effective delivery."

Adds chief executive officer of Vat Modernisation SA, Shannon Friedman: "On the whole, the National Treasury’s 2026 Budget strikes an appropriate balance, placing strong emphasis on a fiscal strategy that promotes inclusive growth, macroeconomic stability, and the long-term sustainability of public finances. Equally importantly, it also delivers meaningful tax relief to consumers."

These tax relief measures were largely made possible due to the R21bn in additional tax revenue collected over the last year, says Friedman. "This boost in revenue can largely be attributed to Sars' modernisation efforts to make tax collection more efficient and robust. But this is just the beginning."

Taxation & Regulation

Unlocking R800bn: The push for modernising South Africa’s tax system

Shannon Friedman  20 Feb 2026

"Over the next five years, the revenue collector will implement its Modernisation 3.0 project to address an estimated R800bn per annum of tax leakage. A significant portion of this project will be the modernisation of Vat reporting and collecting processes, which will further strengthen the fiscus and allow South Africans to reap the benefits of a growth economy."

Parsons agrees: South Africa therefore now needs to shake off the chains of a low-growth economy. "The present economic recovery is still modest and uneven. The economy is not yet on autopilot and disappointed expectations can still easily become self-fulfilling.

"Much higher levels of fixed capital formation are now needed if the Budget’s modest near-term average growth projection of 1.8% is to surprise on the upside and eventually meet the GNU’s GDP growth target of 3.5% by 2030."